State University of Management Deputy Head of the Department of Statistics Nikolai Kuznetsov told the agency “Hitting the Primer”In the future, countries will resort to currency wars more often, i.e. a targeted and controlled reduction of the exchange rate of their national currencies or devaluation by the country’s Central Bank.
The expert said that as a result of this technique, the country’s natural resources and the goods produced in it become cheaper for foreign buyers, and as a result, they become more accessible, more attractive and more competitive in world markets. As a result, the volume of exports, revenues of exporting enterprises and taxes collected by the state are growing. At the same time, imports become more expensive, which reduces the demand for foreign goods, which allows domestic producers to be supported.
According to Kuznetsov, on the backdrop of a decrease in industrial production, states will try to support their economies. Hence, the next US president could turn to Donald Trump’s strategy and start weakening the dollar. Following this, Latin American countries heavily dependent on the dollar will do the same. Hong Kong and the United Arab Emirates will follow them.
Speaking about China, the expert noted that in 2019, the People’s Bank of China had already devalued the yuan to combat US tariffs, and will likely do so today to support its economy. Japan and South Korea could join China.
The expert said that the Ministry of Finance of the Russian Federation is today engaged in developing a new budget rule that will allow to influence the ruble exchange rate.
“It is natural that the actions of Russia, the largest player in the region, will certainly affect neighboring countries,” said Kuznetsov.
The expert believes that the European Union is more likely to start a “currency war in the opposite direction – a war to strengthen the euro against the US dollar”.
At the same time, Kuznetsov warns that currency wars have their own unpleasant consequences.
“The uncontrolled currency war is undermining the economy, destabilizing the banking sector and impoverishing the population. History knows cases when excessive enthusiasm for currency wars led to disaster, ”explained the expert.
Dollar exchange rate on the Moscow Stock Exchange on August 5 augmented up to 60.58 rubles.
Source: Gazeta
Barbara Dickson is a seasoned writer for “Social Bites”. She keeps readers informed on the latest news and trends, providing in-depth coverage and analysis on a variety of topics.